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VOLUME 46 | NUMBER 3 | JUNE 2011

The Effect of the MassHealth Hospital Pay-for-Performance Program on Quality

Keywords. Econometrics; hospitals; incentives in health care; Medicaid

Objective. To test the effect of Massachusetts Medicaid's (MassHealth) hospital-based pay-for-performance (P4P) program, implemented in 2008, on quality of care for pneumonia and surgical infection prevention (SIP).

Data. Hospital Compare process of care quality data from 2004 to 2009 for acute care hospitals in Massachusetts (N=62) and other states (N=3,676) and American Hospital Association data on hospital characteristics from 2005.

Study Design. Panel data models with hospital fixed effects and hospital-specific trends are estimated to test the effect of P4P on composite quality for pneumonia and SIP. This base model is extended to control for the completeness of measure reporting. Further sensitivity checks include estimation with propensity-score matched control hospitals, excluding hospitals in other P4P programs, varying the time period during which the program was assumed to have an effect, and testing the program effect across hospital characteristics.

Principal Findings. Estimates from our preferred specification, including hospital fixed effects, trends, and the control for measure completeness, indicate small and nonsignificant program effects for pneumonia (?0.67 percentage points, p>.10) and SIP (?0.12 percentage points, p>.10). Sensitivity checks indicate a similar pattern of findings across specifications.

Conclusions. Despite offering substantial financial incentives, the MassHealth P4P program did not improve quality in the first years of implementation.

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